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The lack of clarity as to the human rights responsibilities which oil and gas companies face exposes them to risk – it is very easy to be accused of human rights breaches when the goal posts are fluid. The implications of perceived or real human rights breaches can be extremely serious, at times making otherwise very profitable operations unviable.

The European Commission has recently published a draft version of its ‘Guidance for the Oil and Gas Sector on Implementing the UN Guiding Principles on Business and Human Rights’ (EC Draft Guidance). The draft Guidance is available on the website of the Institute for Human Rights and Business1.

The European Commission has acknowledged that responsible oil and gas companies are increasingly seeking to know and show that they respect human rights throughout their activities and business relationships. It has sought to bring clarity to the manner in which oil and gas companies can effectively discharge their human rights responsibilities through draft guidelines released recently.

They provide extremely helpful guidance to those in the sector committed to robust human rights frameworks.

The purpose of the EC Draft Guidance is to provide practical guidance to oil and gas companies about how they can observe and implement the UN Guiding Principles on Business and Human Rights (UN Guiding Principles).

Although neither the EC Draft Guidance nor the UN Guiding Principles are legally binding on oil and gas companies, they provide a useful framework for addressing the human rights impacts of their business. In a political, economic and regulatory environment which is increasingly expecting oil and gas companies to take active steps to respect human rights, the EC Draft Guidance provides a sensible platform to engage with human rights issues.

Assessing human rights impacts requires attention to:

Who? A focus on the rights and perspectives of potentially affected stakeholders;

What? Internationally recognised human rights as the standard for assessment;

How? Through meaningful consulation, relationship-building, and prioritisation according to severity of impact in the assessment process and in consequent action;

Where? Extending to business relationships (based on linkage not leverage), including legacy issues and contextual factors not under the company’s legal control.

EC Draft Guidelines: page 16

UN Guiding Principles

The UN Guiding Principles were developed over several years of research and consultation by the Special Representative to the Secretary-General for Business and Human Rights and were approved by the UN Human Rights Council on 16 June 2011.

The purpose of the UN Guiding Principles is to provide an authoritative global reference point on the respective roles of business and governments in helping to ensure that companies respect human rights in their own operations and through their business relationships. The UN Guiding Principles are, of necessity, very ‘high level’; they apply to all countries and all business enterprises of all sizes and industries.

Although the UN Guiding Principles contain 31 general rules or principles, they are grounded in recognition of three key pillars:

the state duty to protect against human rights abuses by third parties, including businesses, through appropriate policies, regulation and adjudication,

the corporate responsibility to respect human rights, meaning that businesses need to avoid infringing on the human rights of others and address adverse impacts with which they may be involved, and

the need for greater access to effective remedies for victims of business-related human rights abuses, through both judicial and non-judicial means.

Development of EC Draft Guidance

In order to assist businesses to comply with the UN Guiding Principles, the European Commission has developed sector-specific guidance to assist companies in those sectors to respect human rights in light of the challenges of their particular business environments.

One of the sectors chosen by the European Commission for specific guidance was the oil and gas sector.

The EC Draft Guidance has been prepared with the aim of discussing the general principles of the UN Guiding Principles in the specific context of the oil and gas industry.

Salient human rights issues typically highlighted by O&G companies in their policy commitments include: safety in the workplace, freedom of association and collective bargaining, the elimination of child and forced labour, diversity and equality within the workforce, security, the rights of local communities (including relating to health, education, livelihoods, food and water), the rights of indigenous peoples (including, in addition, those relating to land use, cultural heritage and self-determination) and impacts related to emerging activities like shale gas production (such as on the right to water and sanitation).

EC Draft Guidance: page 9

Application of EC Draft Guidance

The EC Draft Guidance is intended by the European Commission to support efforts by oil and gas companies to adopt appropriate policies and practices to implement the UN Guiding Principles and to encourage oil and gas companies to engage more deeply with human rights.

The EC Draft Guidance is not intended to be legally binding; it is ‘guidance’ rather than a binding set of rules. The EC Draft Guidance itself recognises that there is no ‘one size fits all’ solution to the implementation of measures to respect human rights. The application of the recommendations provided in the EC Draft Guidance must be tailored to take into account the circumstances within which a company is operating.

Although the EC Draft Guidance has been developed to take into particular account the experiences of European Union oil and gas companies, it is intended to be globally relevant and of assistance to oil and gas companies outside the European Union.

The EC Draft Guidance is intended to apply to oil and gas companies of all sizes and ownership structures, but is primarily focussed on upstream oil and gas activities.

The extent to which O&G companies are involved with adverse human rights impacts will be heavily influenced by both their operating context, the practices of their business partners, and the effectiveness of the processes that they already have in place to prevent and address such impacts. Operating locations for the sector are determined by where resources exist – which can be in areas of weak governance, including remote or conflict-affected areas, raising additional challenges for the companies involved.

The exploitation of natural resources can generate large revenues that enable states to foster growth, reduce poverty and help ensure the realisation of human rights. However, in states where governance is weak, such exploitation may instead contribute to poverty, corruption, crime and conflict with all the associated negative impacts on individuals’ human rights.

EC Draft Guidance: page 6

Issues addressed by the EC Draft Guidance

The EC Draft Guidance addresses three broad topics:

developing and embedding a policy commitment to respect human rights,

developing, acting upon and communicating appropriate due diligence processes to ensure that human rights are respected, and

Within these broad topics, the following matters are discussed in more detail:

methods for developing a policy commitment to respecting human rights. In particular, the EC Draft Guidance invites companies to consider whether their policy should be developed through a ‘bottom up’ process, through a high-level process or through mapping existing human rights policies and identifying any gaps,

the appropriate scope and nature of human rights due diligence processes. For example, the EC Draft Guidance highlights the importance of ensuring that due diligence processes appropriately capture human rights impacts with which the company is involved but which occur outside the ‘fence’ of its operations. It also discusses the advantages and disadvantages of stand-alone due diligence processes compared with integrating human rights considerations into existing due diligence processes,

taking appropriate action to prevent and mitigate adverse human rights impacts that have been identified. The EC Draft Guidance provides practical suggestions for how companies can apply leverage to ensure that host governments, joint venture participants and other third parties who are involved in its operations respect human rights,

assessment of the effectiveness of a company’s response to adverse human rights impacts. The EC Draft Guidance invites companies to consider how the effectiveness of their response can best be measured, including whether the assessment should be based on quantitative or qualitative criteria, whether feedback should be actively solicited from affected stakeholder groups and whether differential human rights impacts for men and women should be tracked,

communicating on how the company addresses its human rights impacts. The EC Draft Guidance discusses the importance of ensuring that the form, frequency and accessibility of a company’s communications to stakeholders is appropriate to the severity of its human rights impacts. In some circumstances, the severity of the impacts may require in-person meetings with affected stakeholders or formal reporting to relevant markets and authorities, and

grievance mechanisms to remedy adverse human rights impacts which the company has caused or to which it has contributed. The EC Draft Guidance discusses the various types of remedies that might be appropriate for the mechanism to involve, such as apologies, restitution, financial compensation and rehabilitation. It invites companies to consider whether the process should involve neutral third party facilitators or mediators. It also underlines the importance of ensuring that sufficient advice and assistance is provided to stakeholders to allow them to engage in the grievance process on fair, informed and respectful terms.

Status of EC Draft Guidance

Comments on the EC Draft Guidance closed at the beginning of February 2013.

The EC Project Team is now in the process of analysing the comments and feedback provided by stakeholders and is expected to submit a finalised guidance document to the European Commission in April 2013.

Conclusion

The EC Draft Guidance provides a helpful reference point for upstream industry participants to assess their human rights strategies. Oil and gas companies which ignore international human rights guidelines and standards are at risk of missing out on business opportunities as host governments, customers, suppliers and other counterparties choose to do business with other organisations that actively engage with human rights issues.

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